Impacts of sparing use of water on farmer income of China

• Uneven spatial distributions of water use and farmer income over time.
• Blundell–Bond DPD with GMM estimators years 2004–2012.
• Farmer income benefited from sparing use of water 0.085–0.35.
• The region with large population and urban expansion.
• Diversion of resources for agricultural production from rural to urban area.

We examine relationships between nationwide sparing use of water and farmer income of China in this article. As increasing implementation of water projects and irrigation system, the cost of water use has increased in many regions. However, as local policy-oriented urban expansion and ecological restoration have carried out during the past decade, water demand has increased. The spatial distributions of water use and farmer income are uneven and their relationships are ambiguous over time, especially it is uncertain that farmers can benefit from those so called water-saving programs when urban expansion grows faster in China. Based on consumption theory, empirical results of Blundell–Bond dynamic panel-data model with generalized method of moments (GMM) estimators indicate saving one percent of water has positive impacts at 0.085–0.35 percent on farmer income in the following statistical year. Population has negative impacts on farmer income. Particularly in Central China, one percent of increase in population will statistically significantly decrease 0.276 percent of contemporaneous farmer income. Particularly, in Eastern China with large population during years 2004 through 2012, the total amount of water use increases one percent, contemporaneous farmer income loses 0.04 percent. Thus, saving water can benefit future farmer income, and it indicates that urban expansion may induce the diversion of resources and agricultural production from rural to urban area. Policy implication of relationships between water allocation and farmer income distribution caused by water-saving programs needs to be further studied at regional scale, in particularly to the regions with large population and urban expansion in China.